The RED FAME 0 biodiesel premium over gasoil rebounded to almost a 10-week high Tuesday, as gasoil futures traded extremely bearish while feedstock vegoil prices rose sharply.
The RED FAME 0 premium firmed $23.25 to $474/mt, the highest level since January 20, when it stood at $486.75/mt.
The ICE April gasoil contract dropped $15.75 to $341/mt at the London close Tuesday, while the CBOT Soybean Oil May future rose almost 3% to be assessed at 33.97 cents/lb, a near 10-month high.
The firming vegoils complex also pushed feedstock prices higher for RME producers. The RSO May-June-July strip loading physical was heard bid at Eur707/mt Tuesday, from Thursday's bid heard at Eur689/mt.
Faced with a higher RSO level, the RED RME premium also jumped $43.50 to $513/mt. This caused the RME-FAME 0 spread climb to $39/mt, up from $18.75/mt at the previous close.
"With RME replacement at GO+ $527/mt, even the $515/mt trade is very low," a trader said. "RSO is up Eur20 [on the day] and since RME is below replacement cost, a correction was due."
With the BO-GO spread up more than $35/mt Tuesday, FAME 0 was relatively cheaper as its replacement cost was similar to RME, the trader said, referring to a $23.25/mt increase in FAME 0 premium.
However, with the spec switch to summer grade biodiesel in the second quarter, blenders could utilize molecules with higher CFPP, which kept fundamentals weak for RME.
In a matter of two weeks, the RME-FAME 0 spread could be "within a $10 range, and $10 from replacement costs," the trader said.
